Technology
Jefferies Says Buy 4 Top Tech Stocks Now as Q1 Winds Down
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If you read the financial press and watch talking heads on financial networks, you would swear we were ready to roll into a recession. Toss in the fact that about $30 billion in outflows have fled the equity markets year to date, and it makes investors scratch their heads. Why such dire predictions when the possibility for a trade deal is real and Wall Street has a very low bar set for first-quarter earnings?
The fact that the rally for the quarter after the late December lows is the biggest in five years may have something to do with it and could be causing nervous investors to sell the strength. The team at Jefferies remains reasonably positive, and in the firm’s top growth stock calls for the week we found four tech stocks that are offering more aggressive accounts good entry points. All are rated Buy.
The huge social media leader’s stock has been incredibly volatile recently, but it posted outstanding results for the quarter. Facebook Inc. (NASDAQ: FB) is the largest social network with over 2.0 billion monthly active users and over 1.4 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to half of revenues in the United States and Canada and is expanding rapidly in international markets.
The company’s solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.
Facebook reported strong fourth-quarter upside and a pivot toward a “back to normal” focus on innovation, concentrating on projects that “can have a major improvement on people’s lives.” Several key product areas showed solid traction, most notably eCommerce/shopping products on Instagram. The Jefferies team said this:
We spent 3 days at Shoptalk in Las Vegas and Facebook emerged as a winner from those meetings and conversations with Instagram’s shopping capabilities receiving strong reviews from many retailers. Brands are looking for ways to circumvent the Amazon marketplace and go direct to consumer. So far, only about 10% of the current Instagram monthly active users base interacts with the shopping tabs, a number we expect to grow.
The Jefferies price target for the shares is $200, and the Wall Street consensus target is $195.52. The stock closed trading on Monday at $172.07 a share.
Palo Alto Networks
This continues to be one of the most dominant players in its industry. Palo Alto Networks Inc. (NASDAQ: PANW) is helping to lead a new era in cybersecurity by protecting thousands of enterprise, government and service provider networks from cyber threats. Unlike fragmented legacy products, its security platform safely enables business operations and delivers protection based on what matters most in today’s dynamic computing environments: applications, users and content.
Palo Alto Networks security platform has new features that were introduced to help security professionals overcome the distractions and time spent on problems caused by the overwhelming volume of alerts and manual processes associated with operating many discrete security products and, instead, expand breach prevention capabilities and boost operational efficiency.
Jefferies notes that the company has refreshed its entire product line in early 2017 and 2018, and as such it has benefited from those activities. Nonetheless, the company is expanding into the carrier market, which could serve to offset any softness.
Jefferies has a price target of $296, and the posted consensus price objective is $277.76. The shares closed at $240.88 on Monday.
Salesforce.com
This top company reported solid fiscal 2018 results as billings drastically improved, and this quarter was no exception. Salesforce.com Inc. (NYSE: CRM) provides enterprise cloud computing solutions, with a focus on customer relationship management to various businesses and industries worldwide.
It offers enterprise cloud computing applications and platform services, including Sales Cloud that enables companies to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence and collaborate around sales on desktop and mobile devices.
The company also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as connect their service agents with customers on various devices; and Marketing Cloud, which enables companies to plan, personalize and optimize customer interactions.
Jefferies commented on the company’s recent earnings report:
Salesforce.com reported last week and fourth quarter results were modestly better though first quarter revenue guidance came in below consensus, likely because we believe the company missed internal new business targets for the fourth quarter. We cut fiscal first quarter, but raised fiscal 2020 and believe the company remains well positioned to fulfill long-term goals.
The $189 Jefferies price target compares to a $181.32 consensus price. The shares closed trading most recently at $157.65.
ServiceNow
This stock had an outstanding 2018 and remains a top pick at Jefferies. ServiceNow Inc. (NYSE: NOW) develops and sells a hosted, subscription-based suite of services designed to automate various IT department functions, such as help desk, operations management and change/release management.
The company also sells a number of applications that automate various self-service related applications outside of the IT department, such as HR onboarding, facilities requests and governance, risk and compliance.
The company blew out fourth-quarter earnings in January, and the analysts said this regarding first-quarter progress:
We attended the company’s Federal Summit in D.C. Our discussions suggest ServiceNow is gaining traction at federal agencies and we walked away with a positive view on the ability to grow its federal business. Federal business quarter-to-date is tracking at or above quota for the first quarter, partners reported rapid growth in their company practices and we heard of continued success in replacing Remedy and high-win rates in general.
The Jefferies price objective is $242. The consensus price target is $238.03, and the stock closed most recently at $239.86 a share, up over 2.5% on the day.
These four top stocks look like solid choices for aggressive growth accounts. Needless to say, anything can happen with the quarter nearing the end, so it may make sense to buy partial positions here and wait for the first-quarter results in a month or so.
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